July 30, 2019 - 4:15 PM EDT
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Eagle Materials Reports First Quarter Results

DALLAS

Eagle Materials Inc. (NYSE: EXP) today reported financial results for the first quarter of fiscal 2020 ended June 30, 2019. Notable items for the quarter are highlighted below. (Unless otherwise noted, all comparisons are with the prior year’s fiscal first quarter):

First Quarter Fiscal 2020 Results

  • Revenue of $370.6 million, down 6%
  • Net earnings per diluted share of $0.94, down 32%
  • Adjusted net earnings per share of $1.13
    • Adjusted net earnings per share is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in Attachment 6.
    • Total after-tax impact of non-routine items, consisting of costs related to the Company’s planned separation of its businesses and the retirement of our Chief Executive Officer, was $8.4 million, or $0.19 per diluted share. See Attachment 6.

Commenting on the first quarter results, Michael Haack, President and CEO, said, “Our cement sales volume was up 3% to a record 1.6 million tons in the first quarter despite challenging weather conditions and was considerably stronger during periods when the weather was favorable. Market demand for our wallboard also remained healthy when adjusted for a shift in the timing of our price increases and related buying activity. The outlook for the remainder of the year continues to be positive and demand for our products is supported by a number of favorable market dynamics including ongoing growth in jobs and wages, high consumer confidence and low interest rates.”

Mr. Haack concluded, “Our low-cost operations are generating strong cash flow that we are investing to improve our operational efficiency and lower our cost position while continuing to repurchase shares in line with our capital allocation strategy. During the quarter, we purchased more than 2.2 million shares, or nearly 5% of our outstanding shares, and we returned over $200 million to shareholders, through a combination of share repurchases and dividends.”

Segment Results

Heavy Materials: Cement, Concrete and Aggregates

Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates and Joint Venture and intersegment Cement revenue, was $234.7 million, a 3% improvement from the first quarter of fiscal 2019. Heavy Materials operating earnings decreased 5% to $40.6 million due primarily to increased fixed and freight costs coupled with significant wet weather throughout the quarter, which hampered Concrete and Aggregates sales volume.

Cement revenue for the quarter, including Joint Venture and intersegment revenue, was up 5% to $195.3 million, reflecting higher sales prices and improved sales volume. The average net sales price for the quarter improved 1% to $109.70 per ton. Higher freight costs affected net cement prices by approximately $1 per ton during the quarter. Cement sales volume for the quarter was a record 1.6 million tons, up 3%.

Operating earnings from Cement for the first quarter were $36.1 million, 3% below the same quarter a year ago. The decline was primarily due to increased fixed costs and freight costs. Flooding in the Midwest disrupted transportation routes in our markets, causing delays and increasing transportation costs. The Company anticipates some of the disruption will continue into the fall.

Concrete and Aggregates revenue for the first quarter of fiscal 2020 was $39.4 million, a decrease of 3%. First quarter operating earnings were $4.4 million, a 19% decline, reflecting lower sales volume partially offset by improved concrete pricing. Our primary concrete and aggregates markets experienced heavy rainfall during the quarter, which hampered our ability to move product.

Light Materials: Gypsum Wallboard and Paperboard

Revenue in the Light Materials sector, which includes Gypsum Wallboard and Paperboard, declined 10% to $152.4 million. The decrease reflected lower Wallboard sales volume and net sales prices. The average Gypsum Wallboard net sales price for the first quarter of fiscal 2020 was $150.96 per MSF, a 6% decline. Gypsum Wallboard sales volume was 660 million square feet (MMSF), down approximately 7%. We believe the decline in wallboard sales volume versus the prior-year period was primarily due to a shift last year in the timing of pre-buying activity ahead of our July 2018 wallboard price increase.

The average Paperboard net sales price this quarter was $510.32 per ton, down 4%. Paperboard sales volume for the quarter decreased 1% to 81,000 tons.

Operating earnings were $47.9 million in the sector, a decrease of 21%, reflecting lower Wallboard sales volume and prices, partially offset by lower operating costs. The reduced operating costs were primarily related to lower recycled fiber costs during the quarter.

Oil and Gas Proppants

The Oil and Gas Proppants segment reported revenue of $15.2 million, a decrease of 45%. This decline primarily resulted from a 45% decrease in average Frac Sand sales prices, partially offset by an 11% improvement in Frac Sand sales volume. The first quarter operating loss of $3.7 million included $3.8 million of depreciation, depletion and amortization.

Planned Separation of Heavy Materials and Light Materials Businesses

As previously announced on May 30, 2019, the Company plans to separate its Heavy Materials and Light Materials businesses into two independent, publicly traded corporations by means of a tax-free spin-off to Eagle shareholders. The separation is expected to be completed in the first half of calendar 2020. The Company also previously announced it is actively pursuing alternatives for its Oil and Gas Proppants business.

Details of Financial Results

On June 19, 2019, the Board of Directors of the Company approved the retirement of Dave Powers as our Chief Executive Officer. Consistent with the terms of the Company’s incentive plan documents, the vesting on all his outstanding earned but unvested shares of restricted stock accelerated effective upon his retirement and we recorded the expense in the first quarter.

We conduct one of our cement plant operations through a 50/50 joint venture, Texas Lehigh Cement Company LP (the Joint Venture). We use the equity method of accounting for our 50% interest in the Joint Venture. For segment reporting purposes only, we proportionately consolidate our 50% share of the Joint Venture’s revenue and operating earnings, which is consistent with the way management organizes the segments within the Company for making operating decisions and assessing performance.

In addition, for segment reporting purposes, we report intersegment revenue as a part of a segment’s total revenue. Intersegment sales are eliminated on the income statement. Refer to Attachment 3 for a reconciliation of these amounts.

About Eagle Materials Inc.

Eagle Materials Inc. manufactures and distributes Portland Cement, Gypsum Wallboard and Recycled Gypsum Paperboard, and Concrete, Sand and Aggregates from more than 75 facilities across the US. Eagle’s corporate headquarters is in Dallas, Texas.

EXP’s senior management will conduct a conference call to discuss the financial results, forward looking information and other matters at 5:00 p.m. Eastern Time (4:00 p.m. Central Time) on Tuesday, July 30, 2019. The conference call will be webcast simultaneously on the EXP website, eaglematerials.com. A replay of the webcast and the presentation will be archived on the site for one year.

Forward-Looking Statements. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when the Company is discussing its beliefs, estimates or expectations. These statements are not historical facts or guarantees of future performance but instead represent only the Company's belief at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors, many of which are outside the Company's control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. The principal risks and uncertainties that may affect the Company's actual performance include the following: the cyclical and seasonal nature of the Company's business; public infrastructure expenditures; adverse weather conditions; the fact that our products are commodities and that prices for our products are subject to material fluctuation due to market conditions and other factors beyond our control; availability of raw materials; changes in energy costs including, without limitation, natural gas, coal and oil; changes in the cost and availability of transportation; unexpected operational difficulties, including unexpected maintenance costs, equipment downtime and interruption of production; material nonpayment or non-performance by any of our key customers; fluctuations in activity in the oil and gas industry, including the level of fracturing activities and the demand for frac sand; inability to timely execute announced capacity expansions; difficulties and delays in the development of new business lines; governmental regulation and changes in governmental and public policy (including, without limitation, climate change regulation); possible outcomes of pending or future litigation or arbitration proceedings; changes in economic conditions specific to any one or more of the Company's markets; competition; a cyber-attack or data security breach; announced increases in capacity in the gypsum wallboard, cement and frac sand industries; changes in the demand for residential housing construction or commercial construction; risks related to pursuit of acquisitions, joint ventures and other transactions; general economic conditions; and interest rates. For example, increases in interest rates, decreases in demand for construction materials or increases in the cost of energy (including, without limitation, natural gas, coal and oil) could affect the revenue and operating earnings of our operations. In addition, changes in national or regional economic conditions and levels of infrastructure and construction spending could also adversely affect the Company's result of operations. Finally, the proposed separation of our Heavy Materials and Light Materials businesses into two independent, publicly traded corporations is subject to various risks and uncertainties and may not be completed on the terms or timeline contemplated, or at all. These and other factors are described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and subsequent quarterly and annual reports upon filing. These reports are filed with the Securities and Exchange Commission. All forward-looking statements made herein are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed herein will increase with the passage of time. The Company undertakes no duty to update any forward-looking statement to reflect future events or changes in the Company's expectations.

Attachment 1

Statement of Consolidated Earnings

Attachment 2

Revenue and Earnings by Lines of Business

Attachment 3

Sales Volume, Net Sales Prices and Intersegment and Cement Revenue

Attachment 4

Consolidated Balance Sheets

Attachment 5

Depreciation, Depletion and Amortization by Lines of Business

Eagle Materials Inc.

Attachment 1

 

 

Eagle Materials Inc.

Statement of Consolidated Earnings

(dollars in thousands, except per share data)

(unaudited)

 

 

 

Quarter Ended

June 30,

 

2019

 

2018

 

 

 

 

Revenue

$

370,597

 

 

$

393,756

 

 

 

 

 

Cost of Goods Sold

 

295,268

 

 

 

302,122

 

 

 

 

 

Gross Profit

 

75,329

 

 

 

91,634

 

 

 

 

 

Equity in Earnings of Unconsolidated JV

 

9,432

 

 

 

9,251

 

Corporate General and Administrative Expense

 

(21,254

)

 

 

(8,003

)

Litigation Settlements and Losses

 

-

 

 

 

(1,800

)

Other Non-Operating Income

 

200

 

 

 

571

 

 

 

 

 

Earnings before Interest and Income Taxes

 

63,707

 

 

 

91,653

 

 

 

 

 

Interest Expense, Net

 

(8,846

)

 

 

(6,632

)

 

 

 

 

Earnings before Income Taxes

 

54,861

 

 

 

85,021

 

 

 

 

 

Income Tax Expense

 

(13,557

)

 

 

(18,682

)

 

 

 

 

Net Earnings

$

41,304

 

 

$

66,339

 

 

 

 

 

 

NET EARNINGS PER SHARE

 

 

 

Basic

$

0.94

 

 

$

1.39

 

Diluted

$

0.94

 

 

$

1.38

 

 

 

 

 

AVERAGE SHARES OUTSTANDING

 

 

 

Basic

 

43,870,222

 

 

 

47,690,351

 

Diluted

 

44,150,211

 

 

 

48,144,325

 

 

 

 

 

Eagle Materials Inc.

Attachment 2

 

 

Eagle Materials Inc.

Revenue and Earnings by Lines of Business

(dollars in thousands)

(unaudited)

 

 

 

Quarter Ended

June 30,

 

2019

 

2018

Revenue*

 

 

 

 

 

 

 

Heavy Materials:

 

 

 

Cement (Wholly Owned)

$

163,555

 

 

$

155,346

 

Concrete and Aggregates

 

39,401

 

 

 

40,509

 

 

 

202,956

 

 

 

195,855

 

 

 

 

 

Light Materials:

 

 

 

Gypsum Wallboard

$

126,724

 

 

$

142,415

 

Gypsum Paperboard

 

25,685

 

 

 

27,786

 

 

 

152,409

 

 

 

170,201

 

 

 

 

 

Oil and Gas Proppants

 

15,232

 

 

 

27,700

 

 

 

 

 

Total Revenue

$

370,597

 

 

$

393,756

 

 

 

 

 

 

Segment Operating Earnings

 

 

 

 

 

 

 

Heavy Materials:

 

 

 

Cement (Wholly Owned)

$

26,689

 

 

$

28,083

 

Cement (Joint Venture)

 

9,432

 

 

 

9,251

 

Concrete and Aggregates

 

4,434

 

 

 

5,484

 

 

 

40,555

 

 

 

42,818

 

 

 

 

 

Light Materials:

 

 

 

Gypsum Wallboard

$

37,932

 

 

$

50,480

 

Gypsum Paperboard

 

9,944

 

 

 

9,994

 

 

 

47,876

 

 

 

60,474

 

 

 

 

 

Oil and Gas Proppants

 

(3,670

)

 

 

(2,407

)

 

 

 

 

Sub-total

 

84,761

 

 

 

100,885

 

 

 

 

 

Corporate General and Administrative Expense

 

(21,254

)

 

 

(8,003

)

Litigation Settlements and Losses

 

-

 

 

 

(1,800

)

Other Non-Operating Income

 

200

 

 

 

571

 

 

 

 

 

Earnings before Interest and Income Taxes

$

63,707

 

 

$

91,653

 

 

* Net of Intersegment and Joint Venture Revenue listed on Attachment 3

Eagle Materials Inc.

Attachment 3

 

 

Eagle Materials Inc.

Sales Volume, Net Sales Prices and Intersegment and Cement Revenue

(dollars in thousands, except per ton data)

(unaudited)

 

 

 

Sales Volume

 

Quarter Ended

June 30,

 

2019

 

2018

 

Change

Cement (M Tons):

 

 

 

 

 

Wholly Owned

 

1,318

 

 

1,275

 

+3

%

Joint Venture

 

232

 

 

236

 

-2

%

 

 

1,550

 

 

1,511

 

+3

%

 

 

 

 

 

 

Concrete (M Cubic Yards)

 

310

 

 

319

 

-3

%

 

 

 

 

 

 

Aggregates (M Tons)

 

799

 

 

856

 

-7

%

 

 

 

 

 

 

Gypsum Wallboard (MMSF’s)

 

660

 

 

710

 

-7

%

 

 

 

 

 

 

Paperboard (M Tons):

 

 

 

 

 

Internal

 

33

 

 

32

 

+3

%

External

 

48

 

 

50

 

-4

%

 

 

81

 

 

82

 

-1

%

 

 

 

 

 

 

Frac Sand (M Tons)

 

407

 

 

366

 

+11

%

 

 

 

 

 

 

 

 

Average Net Sales Price*

 

Quarter Ended

June 30,

 

2019

 

2018

 

Change

Cement (Ton)

$

109.70

 

$

108.69

 

+1

%

Concrete (Cubic Yard)

$

103.52

 

$

101.66

 

+2

%

Aggregates (Ton)

$

9.66

 

$

9.75

 

-1

%

Gypsum Wallboard (MSF)

$

150.96

 

$

160.71

 

-6

%

Paperboard (Ton)

$

510.32

 

$

531.99

 

-4

%

 

 

 

 

 

 

*Net of freight and delivery costs billed to customers

 

 

 

 

 

 

Intersegment and Cement Revenue

 

Quarter Ended

June 30,

 

2019

 

2018

Intersegment Revenue:

 

 

 

Cement

$

4,253

 

$

4,178

Concrete and Aggregates

 

377

 

 

331

Paperboard

 

17,015

 

 

17,347

 

$

21,645

 

$

21,856

 

 

 

 

Cement Revenue:

 

 

 

Wholly Owned

$

163,555

 

$

155,346

Joint Venture

 

27,505

 

 

27,264

 

$

191,060

 

$

182,610

Eagle Materials Inc.

Attachment 4

 

Eagle Materials Inc.

Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

 

 

 

June 30,

 

March 31,

 

 

2019

 

2018

 

2019*

ASSETS

 

 

 

 

 

 

Current Assets –

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

19,162

 

 

$

14,334

 

 

$

8,601

 

Restricted Cash

 

 

-

 

 

 

38,753

 

 

 

-

 

Accounts and Notes Receivable, net

 

 

174,279

 

 

 

184,083

 

 

 

128,722

 

Inventories

 

 

263,612

 

 

 

241,000

 

 

 

275,194

 

Prepaid and Other Assets

 

 

9,464

 

 

 

15,619

 

 

 

15,104

 

Total Current Assets

 

 

466,517

 

 

 

493,789

 

 

 

427,621

 

 

 

 

 

 

 

 

Property, Plant and Equipment, net

 

 

1,424,703

 

 

 

1,617,535

 

 

 

1,426,939

 

 

 

 

 

 

 

 

Investments in Joint Venture

 

 

71,305

 

 

 

60,309

 

 

 

64,873

 

Operating Lease Right of Use Asset

 

 

63,344

 

 

 

-

 

 

 

-

 

Notes Receivable

 

 

2,772

 

 

 

3,266

 

 

 

2,898

 

Goodwill and Intangibles

 

 

228,316

 

 

 

238,541

 

 

 

229,115

 

Other Assets

 

 

12,121

 

 

 

13,535

 

 

 

17,717

 

 

 

$

2,269,078

 

 

$

2,426,975

 

 

$

2,169,163

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities –

 

 

 

 

 

 

Accounts Payable

 

$

83,916

 

 

$

93,182

 

 

$

80,884

 

Accrued Liabilities

 

 

60,550

 

 

 

95,910

 

 

 

61,949

 

Operating Lease Liabilities

 

 

11,990

 

 

 

-

 

 

 

-

 

Current Portion of Senior Notes

 

 

36,500

 

 

 

-

 

 

 

36,500

 

Total Current Liabilities

 

 

192,956

 

 

 

189,092

 

 

 

179,333

 

Long-term Liabilities

 

 

30,257

 

 

 

30,158

 

 

 

34,492

 

Non-current Lease Liabilities

 

 

55,884

 

 

 

-

 

 

 

-

 

Bank Credit Facility

 

 

495,000

 

 

 

270,000

 

 

 

310,000

 

Private Placement Senior Unsecured Notes

 

 

-

 

 

 

36,500

 

 

 

-

 

4.500% Senior Unsecured Notes due 2026

 

 

345,259

 

 

 

344,590

 

 

 

345,092

 

Deferred Income Taxes

 

 

94,456

 

 

 

125,156

 

 

 

90,759

 

Stockholders’ Equity –

 

 

 

 

 

 

Preferred Stock, Par Value $0.01; Authorized 5,000,000 Shares; None Issued

 

 

-

 

 

 

-

 

 

 

-

 

Common Stock, Par Value $0.01; Authorized 100,000,000 Shares; Issued and Outstanding 42,924,186; 47,912,300 and 45,117,393 Shares, respectively

 

 

429

 

 

 

479

 

 

 

451

 

Capital in Excess of Par Value

 

 

-

 

 

 

74,568

 

 

 

-

 

Accumulated Other Comprehensive Losses

 

 

(3,283

)

 

 

(3,956

)

 

 

(3,316

)

Retained Earnings

 

 

1,058,120

 

 

 

1,360,388

 

 

 

1,212,352

 

Total Stockholders’ Equity

 

 

1,055,266

 

 

 

1,431,479

 

 

 

1,209,487

 

 

 

$

2,269,078

 

 

$

2,426,975

 

 

$

2,169,163

 

 

*From audited financial statements

Eagle Materials Inc.

Attachment 5

Eagle Materials Inc.

Depreciation, Depletion and Amortization by Lines of Business

(dollars in thousands)

(unaudited)

The following table presents Depreciation, Depletion and Amortization by lines of business for the quarters ended June 30, 2019 and 2018:

 

 

Depreciation, Depletion and Amortization

 

Quarter Ended

June 30,

 

2019

 

2018

 

 

 

 

Cement

$

14,218

 

$

12,921

Concrete and Aggregates

 

2,191

 

 

2,053

Gypsum Wallboard

 

4,952

 

 

4,830

Paperboard

 

2,163

 

 

2,109

Oil and Gas Proppants

 

3,839

 

 

7,595

Corporate and Other

 

597

 

 

342

 

$

27,960

 

$

29,850

 

 

 

 

Eagle Materials Inc.

Attachment 6

Eagle Materials Inc.

Non-GAAP Financial Measures

(unaudited)

(Dollars, other than earnings per share amounts, and number of shares in millions)

Adjusted earnings per diluted share (Adjusted EPS) is a non-GAAP financial measure and represents earnings per diluted share excluding the impacts from non-routine items, such as business separation costs and CEO retirement costs (Non-routine Items). Management uses measures of earnings excluding the impact of Non-routine Items as a basis for comparing operating results of the Company from period to period and for purposes of its budgeting and planning processes. Although management believes that Adjusted EPS is useful in evaluating the Company’s business, this information should be considered as supplemental in nature and is not meant to be considered in isolation, or as a substitute for earnings per diluted share and the related financial information prepared in accordance with GAAP. In addition, our presentation of Adjusted EPS may not be the same as similarly titled measures reported by other companies, limiting its usefulness as a comparative measure.

The following shows the calculation of Adjusted EPS and reconciles Adjusted EPS to earnings per diluted share in accordance with GAAP for the three months ended June 30, 2019. The amounts below are presented after-tax and were determined using a tax rate of 25% for the three months ended June 30, 2019:

 

Quarter Ended

June 30,

 

2019

 

 

After-tax impact of Business Separation and CEO retirement costs

$

8.4

Total Non-routine Items impact, net

$

8.4

Diluted average shares outstanding

 

44.2

Diluted earnings per share impact from Non-routine Items

$

0.19

 
 

 

Quarter Ended

June 30,

 

2019

 

 

Earnings per diluted share in accordance with generally accepted accounting principles

$

0.94

Add back: Earnings per diluted share impact from Non-routine Items

$

0.19

Adjusted EPS

$

1.13

 

For additional information, contact at 214-432-2000.
Michael R. Haack
President and Chief Executive Officer
D. Craig Kesler
Executive Vice President and Chief Financial Officer
Robert S. Stewart
Executive Vice President, Strategy, Corporate Development and Communications


Source: Business Wire (July 30, 2019 - 4:15 PM EDT)

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